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HP Buys Palm for $1.2 billion

Hewlett Packard (HP) will buy Palm for $1.2 billion, or $5.70 per share. Reuters has more:

Analysts say 2010’s third-largest U.S. tech acquisition grants Palm’s devices global production and distribution reach while launching the world’s top PC maker into a tech arena experiencing blistering growth. Analysts said HP has deep pockets to invest in Palm, can expand its carrier relationships and negotiate better component pricing from existing suppliers.

“If you saw the guidance Palm just put out, it was clear they had to sell,” said Phil Cusick, analyst at Macquarie Research. “Given how quickly Palm’s business was falling off and how fast their cash was going out the door, they’re lucky to get what they got.

Todd Bradley, executive vice president of HP’s computer division, said the company plans to “invest heavily” in Palm, increasing spending on sales and marketing and research and development in the hope of spurring the developer community into writing more applications for the platform.

HP “would be one of the few companies that I think could successfully turn Palm around. The company has great brand, great international distribution,” said C.L. King Associates’ analyst Lawrence Harris. “That will open a lot of doors.”

HP’s foray into the fiercely contested smartphone arena, while it may not immediately threaten Apple, and Research in Motion’s BlackBerry, may increase pressure on Nokia (NOK1V.HE), Motorola (MOT.N) and other device manufacturers now battling to expand their market share.

HP will probably slap together an appealing Palm + Android combo. This might be a solid step towards finally giving Apple solid smartphone competition. Maybe it’s a good thing Lenovo didn’t get its hands on Palm. Things will start looking a lot more interesting with HP in the game.